The New Medicare Drug Plan and Beneficiaries With Mental Illness

On December 8, 2003, President Bush signed into law the Medicare Modernization Act – a new law expanding the Medicare program to offer coverage for outpatient prescription drugs. While few of the new law’s provisions apply solely to Medicare beneficiaries living with mental illness, the expanded coverage includes many changes that will impact the way Medicare is able to pay for mental illness treatment. The following are commonly asked questions and answers about the how the new law will affect beneficiaries with mental illness(both elderly and non-elderly Social Security Disability Insurance (SSDI) beneficiaries).

NAMI urges support for legislation to ensure that the upcoming Medicare drug benefit offers coverage for medications commonly prescribed to treat anxiety disorders and acute mania in bipolar disorder.

The Medicare Modernization Act (MMA) that created the upcoming Medicare drug benefit includes a provision creating a class of medications that must be excluded from Part D coverage. Included in this exclusion are benzodiazepines that are commonly prescribed to treat acute mania in bipolar disorder and anxiety disorders. In NAMI's view, it was unfortunate that this inequitable exclusion was ever included in the law. In fact, the exclusion was based on a reference to an optional coverage exclusion added to the state-federal Medicaid program in 1990. NAMI is still working with officials at CMS to narrow the scope of this exclusion to make coverage available for clinically appropriate uses of benzodiazepines.

In addition, NAMI is also working with Representatives Ben Cardin (D-MD) and Jim Ramstad (R-MN) to support legislation (HR 3151) to amend the MMA to remove benzodiazepines from the excluded category of drugs in the Medicare drug benefit (Part D). Click here (PDF, 87 kb) to read NAMI's letter of support for this important legislation. Advocates are strongly encouraged to contact House members to urge them to cosponsor this important legislation.

States Will Be Able to Cover Benzodiazepines for Dual Eligibles

In guidance sent to state Medicaid agencies on June 3, the Centers for Medicare and Medicaid Services (CMS) clarified that states will be able to receive federal Medicaid matching funds if they elect to supplement the Medicare drug benefit and cover benzodiazepines. This will help ensure that persons concurrently eligible for both Medicare and Medicaid (so-called dual eligibles) will be able to get coverage of benzodiazepines. Click here to see a copy of this CMS guidance.

MMA FAQs

When will the new drug coverage program go into effect?

The new drug benefit goes into effect on January 1, 2006. It is a voluntary program and will be administered by federally-approved private plans that offer insurance coverage for the cost of prescription drugs. Beginning in May 2004, an interim drug discount card will be available for Medicare beneficiaries. These cards will offer 10 to 15% discounts on prescriptions. Discounts on the purchase of a card will be available for most low-income beneficiaries. More information on the interim drug discount card is available at: http://www.medicare.gov/maddc/home.asp

How much will the new Medicare drug benefit cost?

It is estimated that the new Medicare drug benefit (also known as Part D) will have premiums of $35 per month in the first year (2006) – based on the enrollee’s choice of plan. There will also be a $250 annual deductible (which will indexed each year). Additionally, there will be cost sharing of 25% above the deductible, up to the coverage limit of $2,250. Above this $2,250 coverage limit, benefits will cease, up to the point that costs exceed the $3,600 "stop loss" threshold (applied to out-of-pocket spending). This gap in coverage is known as the "doughnut hole." Above the $3,600 "stop loss" limit, catastrophic coverage will begin with Medicare with enrollees paying the greater of 5% coinsurance or $2 generics/$5 brand drugs.

Why is the new Medicare drug benefit limited?

Congress and the Bush Administration agreed in advance to limit the overall cost of any new drug benefit to $400 billion over the next decade. This restriction on overall spending meant that Congress was not able to develop a plan that would meet every beneficiaries’ drug coverage need. The structure of the new program therefore favors several priorities:

Generous subsidies for beneficiaries with low-incomes (those under 150% of poverty, or about $13,500 for an individual, and $18,000 for a couple), and

Incentives for employers that currently offer drug coverage to maintain coverage for the retirees (direct subsidies of 28% of costs, about $250).

Are subsidies available for low-income beneficiaries?

Yes. According the Congressional Budget Office (CBO), $192 billion is included in the new law to extend coverage to the 14 million Medicare beneficiaries at or below 150% of poverty. For those at or below 100% of poverty (about $9,000 for individuals and $12,000 for couples), there will be no monthly premiums, no annual deductible and no gaps in coverage (i.e., the "doughnut hole"). The only cost will be minimal cost-sharing ($1 for a generic and $3 for a brand name prescription medication), cost sharing would be waived for persons residing in institutions.

For those beneficiaries between 100% and 135% of poverty there will be no premium and co-payments will be limited to $3 for a generic and $5 for a brand name prescription medication. All beneficiaries below 135% of poverty would be subject to an asset limit of $6,000 for individuals and $9,000 for a couple (indexed to inflation). Like the current Medicaid asset test, this will exclude a residence and an automobile. It is expected that most Medicaid beneficiaries would meet these income and asset restrictions.

For beneficiaries between 100% and 150% of poverty ($13,500 for singles, $18,000 for couples), there will be sliding scale premiums (expected to be between $0 and $35), an annual deductible no higher than $50 and 15% coinsurance. These individuals would also have to meet a $10,000/$20,000 asset test single/couple, indexed to inflation. Above the $3,600 catastrophic out-of-pocket limit, cost sharing would then be limited to $2 for a generic, $5 for a brand name prescription medication.

What happens if I am "dually eligible" for both Medicare and Medicaid?

The new law assumes that low-income persons dually eligible for Medicare and Medicaid will get their drug coverage through Medicare. In fact, coverage of prescription drugs under state Medicaid programs will end for dual eligibles on January 1, 2006, thereby requiring them sign up for the new program. However, eligibility for all other Medicaid services will continue for dual elgibles. It is important to note that drug coverage is still optional for state Medicaid programs and that these low-income Medicare beneficiaries will have access to a new federal entitlement - without restrictions on coverage and access that states have been imposing in recent years. As noted above, this new Medicare drug benefit will be available for dual eligibles with no premium, no deductible, no gaps in coverage and minimal cost sharing. Finally, this shift of drug coverage for dual eligibles to Medicare will result in an estimated net savings of $17.2 billion over the next 10 years for states (helping to further ease the strain in state Medicaid programs).

Will there be restrictive formularies or restrictions on access to specific medications?

Probably. It is expected that most health plans that participate in the new Medicare drug program will impose some type of formulary or pre-approved list of limited drugs within each therapeutic class (e.g., atypical antipsychotic medications). The new law does, however, contain significant standards and limitations on the ability of Medicare drug plans to impose such restrictions:

Medications on the formulary must be disclosed to potential enrollees before each plan year begins and appropriate notice to plan enrollees will be required in advance of any change in a formulary,

Formularies must be developed and reviewed by a Pharmacy & Therapeutics (P&T) Committee made up of pharmacists and physicians with experience treating Medicare beneficiaries,

P&T Committees will be charged with educating enrollees and providers about the formulary,

Formularies cannot be changed during a plan year, except to add new drugs and new therapeutic uses,

An independent body (U.S. Pharmacopeia) will be developing model categories and classes that will set anti-discrimination guidelines that will be enforced by the Health and Human Services (HHS) Secretary,

Enrollees will have appeal rights to access non-formulary medications when the prescribing physician determines that a non-formulary drug is more effective, and

Plans will be required to establish exceptions for any tiered cost sharing (i.e., higher cost sharing for certain medications) in cases where a physician determines that a preferred drug would not be as effective as a non-preferred drug.

Will there be special assistance for Medicare beneficiaries with mental illnesses or other mental impairments?

Yes. The new law requires the Centers for Medicare and Medicaid Services (CMS) to establish a new Office of Beneficiary Assistance and a Medicare Beneficiary Ombudsman program. This new Ombudsman program will charged with advocating for interests of vulnerable Medicare beneficiaries with mental disabilities – including severe mental illness. In addition, the legislative report accompanying the final Medicare bill contains the following directive to CMS:

"It is the intent of the Conferees that Medicare beneficiaries have real, unimpeded access to prescription drugs for the treatment of mental illness and neurological diseases resulting in severe epileptic episodes under the new provisions of Part D. To fulfill this purpose, the Administrator of the Center for Medicare Choices shall issue regulations before the first open enrollment period to ensure that Medicare beneficiaries have open, unimpeded access to pharmaceutical treatments for mental illness, including but not limited to schizophrenia, bipolar disorder, depression, anxiety disorder, dementia, and attention deficit disorder/attention deficit hyperactivity disorder and neurological illnesses resulting in epileptic episodes."

What position did NAMI take on passage of the Medicare drug bill in Congress?

NAMI offered cautious support for this legislation – not as the "perfect" Medicare drug benefit, but as an important step forward in filling a major gap in the Medicare program. NAMI’s letter to Congressional leaders and a more detailed explanation of NAMI’s position can be found at: